Results of FedEx (FDX) Q3 2023
This photo shows the FedEx logo on February 16, 2023 in Washington DC, USA.
Celal Gunes | Anadolu Agency | Getty Images
FedEx lifted its full-year earnings guidance on Thursday as cost-cutting measures offset continued weakness in demand at units like FedEx Express.
FedEx now expects fiscal 2023 adjusted earnings per share to be between $14.60 and $15.20, up from a previous guidance of between $13.00 and $14.00. Wall Street had expected full-year earnings per share of $13.56, according to Refinitiv consensus estimates.
“We are adjusting to the cost basis holistically on all dimensions and all areas,” said Chief Financial Officer Mike Lenz. “Every dollar is under scrutiny.”
The company’s shares are up more than 11% in after-hours trading.
Here’s how FedEx performed compared to Refinitiv in the third quarter of fiscal 2023:
- Earnings per share: $3.41 adjusted vs $2.73 expected
- Revenue: $22.17 billion versus $22.74 billion expected
Revenue of about $22.2 billion represented a 6% decline from $23.6 billion in the third quarter of fiscal 2022.
FedEx reported net income of $771 million for the period, compared to $1.11 billion in the same quarter last year. Excluding one-time items, FedEx reported earnings per share of $3.41, beating estimates but marking a dramatic decrease from $4.59 per share for the comparable period last year.
The company reiterated Thursday that it expects more than $4 billion in cost reductions by the end of fiscal 2025.
“We have continued to urgently strive to improve efficiency and our cost measures are taking effect, providing an improved outlook for the current fiscal year,” CEO Raj Subramaniam said in a earnings statement.
Last month, Memphis, Tenn.-based FedEx said it would lay off 10% of its officers and directors as part of its far-reaching plan to cut costs while consumer demand cools. Subramanian said on the company’s conference call that certain workforce-related expenses fell 8% year over year. He said US jobs are expected to fall by about 25,000 year-on-year.
FedEx’s cost-saving plans also included cutting flights and grounding aircraft, reducing office space, and ground unit adjustments in pickup and delivery.
Subramanian said the company saved $1.2 billion in total enterprise expenses year over year. During the quarter, FedEx reduced flight hours by 8% and spending on salaries and benefits by 4%. It plans to park more aircraft in the fourth quarter and flight hours are expected to fall by double digits.
The company expects to save an additional $50 million in the next quarter after eliminating some domestic pickup and delivery routes and improving courier efficiency.
FedEx increased its shipping rates by an average of 6.9% in January to offset refrigerated demand and on Thursday reported an 11% increase in revenue per shipment in the fiscal third quarter.
The company also said it expects volumes to improve in the current quarter and its fiscal first quarter next year.
FedEx is expected to update investors at an event on April 5. The company was also able to comment on the tense contract negotiations with the pilots’ union FedEx. The pilots unanimously agreed to allow the union to authorize a strike, even though strikes in the industry take a long and complicated process to take place.